Customers can use it to send messages for free within 24 hours from the time customer contacted them, but after that period expires, WhatsApp charges businesses between 0. So far, Facebook was offering its small business customers highly targeted advertising.
It also provides tools for customer service management through its messaging apps. One of the main parts of it is revenue from selling hardware. However, Facebook probably does not make any profit from it, and the question is if it will ever do.
In Facebook sold around 1 million Portal devices whoose main focus is to serve as a dedicated communicator. It fits the Facebook strategy of connecting people together, but I would not expect this to become anything significant going forward. Oculus is a virtual reality headset that Facebook acquired in In Facebook introduced Oculus Quest 2 , an upgrade to its previous model.
It puts Facebook ahead of Sony, its main competitor in this area and leader in It is not a small number, but Facebook is probably not making any money from this and might never do, at least not directly. Facebook is not trying to build a hardware business here. It looks like a big opportunity. The question is how Facebook will make money from it and what will be its business model.
Facebook will probably keep selling hardware at a cost level to make it interesting for a maximum number of people and focus on making money in other ways. One option is charging software developers some percentage cut from their sales on the platform. This business model is already in place, even though the number of developers making apps and games for Oculus is still small.
Given how quickly users of Oculus are growing, it might become significant enough to attract more gaming developers to make Oculus another gaming platform next to Xbox, PlayStation, and Nintendo. Apart from advertising, hardware sales, and WhatsApp API fees that I mentioned, there are also other ways how Facebook currently makes money.
The revenue from these is super tiny, but it makes sense to be at least aware of them:. There is a saying that unless you have a group of people who hate you, you are not really successful. By this measure, Facebook is one of the most successful companies in the world. Unsurprisingly, the recent WSJ rating of US companies showed Facebook as the worst one in customer satisfaction among the top in their ranking. Nowadays, people blame Facebook nearly for everything that happens worldwide, and not all of it is well deserved.
Facebook privacy scandals are shameful, but life goes on, and there is no reason why Facebook should not come back from this low level stronger and take it as a learning experience. Mark Zuckerberg publicly admits Facebook is not the best poster boy for privacy initiatives right now, but that they want to become strong in it. Facebook will need to consistently work on this for years before people can take their privacy commitments seriously.
And I agree that this might take a decade, even if Facebook focuses on it. However, I am pretty skeptical that we will ever see Facebook as a privacy leader. It is simply incompatible with their current business model that motivates them to collect as much data about people as possible.
When you look at what Facebook is doing in practice, it is clear that this commitment to a strong reputation for privacy is just a talk without substance. Mark Zuckerberg is a smart guy, and he has to be well aware that Facebook cannot afford another security blowup like Cambridge Analytica or Russian election interference without dare consequences from regulators, its users, and advertisers.
But these were security issues and breaches of their previous FTC settlement orders. That is very probably not going to happen. Their approach will be to meet all the requirements there, but they will hardly push privacy further unless it benefits their business in some other way.
Facebook is not fighting for privacy here. It is openly fighting against it. Again, this does not make Facebook evil. In this fight with Apple, Facebook is simply fighting for itself and its core customers. Facebook customers are not its users, but rather around 10 million, primarily small businesses that advertise on Facebook and Instagram. There are many more controversies about Facebook outside of privacy and security.
There is undoubtedly still space for how Facebook can still improve its AI algorithms to help with that. Mainly by stopping to actively promote a certain type of political posts that create heated emotional discussion even at our dinner tables.
Like our email spam filters, it works very well most of the time, but spam will show up in your inbox from time to time. Some groups advocate that Facebook is doing far too little and should broaden the range of content that is not allowed on the platform. On the other hand, some groups warn that Facebook is taking down too much content. These issues and connected disagreements are not going away anytime soon.
Another level of issues with content moderation is that more countries worldwide apply more restrictive laws limiting free political speech. Something that was seen only in a few countries like, for example, China, became much more common. Facebook has a choice to apply local laws in a given country which can be highly undemocratic.
The alternative is to refuse to take the content down and face the consequences that, in an extreme case, can lead to the exit of Facebook from a given country.
The number of users of core Facebook and Messenger apps is still growing. For a company with such a vast market presence already, this is a success. Most of this growth is coming from the Asia-Pacific region and Africa. Growth in North America and Europe is in the low single digits but still growing, despite claims that people are leaving Facebook and deleting their accounts.
Some people who started using Facebook more during a pandemic in the US dropped the app later, but this small drop did not offset a significant increase during the year. And it is not just the number of users. Facebook is also doing well in growing its revenue and profits. It looks that advertisers are not leaving Facebook either. This was despite weak performance during the first half of as the pandemic started.
Putting it all together, it seems that although there is so much toxicity around Facebook and so much bad PR, at the end of the day, its users continue using it. Facebook can attract new users both in the US and especially in Asia. Advertisers, primarily small businesses, are sticking with Facebook too. That does not mean that there are not some challenges ahead that Facebook will need to navigate carefully.
The problem is that not only would users either cancel their accounts by the millions—or never agree to pay the subscription fee in the first place—setting a fee would also eliminate the possibility of further dynamism and growth. For a social media site to go from million users to 2. Using an advertiser-supported model , rather than charging each user individually, is unquestionably the easiest way for Meta to garner as many users as possible.
The more users on the site, the greater the number of advertisers willing to engage them, and the more those advertisers are willing to spend. Securities and Exchange Commission. Accessed Nov. Yahoo Finance. The New York Times. Form S-3 Registration Statement ," Page Business Insider.
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But the advertisers never get access to private user information, contrary to what some people say. They choose the targeting options, and Facebook then shows the ads to the right people based on automated computer algorithms.
In other words, Facebook does not "sell" data in any way. That is simply not how their business model works. Facebook has 2. Of these, 2. Here's a chart from Facebook's latest earnings release showing revenue growth in the past 9 quarters, from October to December Facebook currently makes They also own WhatsApp and Facebook Messenger, but these apps don't drive a lot of ad revenue yet. Additionally, Facebook makes money from hardware products.
They own the virtual reality headset maker Oculus and sell the Facebook Portal. The company is also expanding into services like online payments, eCommerce, and business messaging. These services don't make much money yet but likely will in the future.
Most of the ads are "pay-per-click," meaning that advertisers pay Facebook each time a person clicks on an ad. Even though each click may not cost that much, it quickly adds up to billions of clicks and billions of dollars. Advertisers who are interested in reaching people use Facebook's advertising tools to decide what kind of people they want to reach.
For example, here's what an advertiser from a luxury car company like Mercedes-Benz might decide to target:. Advertisers can achieve a much higher return on investment by targeting their ads to people who are likely to be interested. Most ads on the internet are targeted in one way or another.
Facebook is just better at it than everyone else. Given a choice, most users would rather see relevant ads instead of irrelevant ads.
The relevance provides a better user experience than ads on TV, for example. In addition, having access to such powerful advertising tools is very valuable for small to medium-sized businesses, which are now able to compete with big companies without having large advertising departments.
According to Facebook, there are now 8 million businesses globally that use their advertising platform. Here's an example of an ad on Facebook, targeted to me because I have shown an interest in this product in the past:. Same as with the Facebook platform, the company also makes money from ads on Instagram. They don't have a lot of ads on WhatsApp yet, so that platform doesn't contribute much revenue at the moment. The ads in the old news feed on Facebook and Instagram make the most money, but ads in the disappearing Stories are also becoming much more popular and making more money each year.
Interestingly, most of Facebook's revenue now comes from ads on their mobile apps. This is a big change from the company's early days when most of the revenue came from the website. However, Facebook has recently been rolling out privacy tools that allow users to prevent some of their data being used for targeted ads.
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